Over Control? Well Rule Fires Concern

If implemented as proposed, the Interior Department’s Well Control Rule may slow or shut down oil and gas drilling in the Gulf of Mexico, according to a grassroots group that advocates for the industry.

“It’s important we conduct further study of the finer points and practical effects of this new rule before forcing it on companies engaged in operations in the Gulf,” said Lori LeBlanc, GEST’s executive director.The Gulf Economic Survival Team, launched in the wake of Deepwater Horizon and President Obama’s drilling moratorium in 2010, says the proposed rule, revealed in April, would send production costs soaring, causing drilling to decline by more than half and causing producers to look elsewhere for drilling and production projects. That’s according to a GEST-sponsored study done by consultants Wood Mackenzie.

Among its findings, Wood Mackenzie’s study said the proposed rule would:

» Decrease Gulf drilling by up to 55 percent.

» Reduce Gulf energy production by 35 percent by 2030.

» Put at risk at least 105,000 jobs, many of those in Louisiana and Texas, by 2030.

The proposed rule, developed by Interior’s Bureau of Safety and Environmental Enforcement, is intended to prevent catastrophic events such as Deepwater Horizon by tightening standards for blowout preventers. Eleven workers died during the Deepwater Horizon tragedy. Drilling was shut down for six months and the Gulf of Mexico sustained heavy damages. The Office of Management and Budget will decide the fate of the proposed Well Control Rule, probably by the end of the year.

LeBlanc said GEST, like BSEE, wants enhanced safety and environmental protection. However, she said, the proposed rule would drive up drilling costs, making many drilling projects not feasible. She also criticized the “one-size-fits-all” safety requirements; some critics suggest because rigs differ so much, in some cases the proposed rule would drive up risks.

A Wood Mackenzie spokeswoman said the study focused on drilling margins, not other costs. It would cost more to implement the proposed regulations and take longer to drill the well, said Masha Lyons, a senior upstream consultant.

Possible job losses were projected based on current practice and technology, Lyons said, while price scenarios were based with oil selling at $80 a barrel.

Increased costs in the Gulf could push drillers to other basins, such as those in Africa, the study suggested.

The proposed Well Control Rule has drawn criticism from oil companies and elected officials, but BSEE spokesman Gregory Julian told The Daily Advertiser last month that changes were made with industry input that included oil and gas companies, trade organizations, operators and equipment manufacturers over the past four years.

“Instead of tackling safety concerns, this rule implements costly and unworkable provisions that will constitute a de facto moratorium in the Gulf of Mexico,” Boustany said. “While the price of oil may rebound, if this rule goes into effect as written, oil and gas operations in the Gulf of Mexico will not. I’m doing everything in my power to expose this regulation for what it is: an all-out assault on our struggling oil and gas industry and the men and women who depend on these jobs.”

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